House of Commons - International Development

Select Committee on International Development Fifth Report

4 Economic Partnership Agreements

29. The Economic Partnership Agreement (EPA) negotiations between the EU and six regional groupings within the African, Caribbean and Pacific (ACP) bloc are due to conclude at the end of 2007. Under the terms of the Cotonou Agreement, the EPAs will replace current EU-ACP trade arrangements from 2008. The Agreements are linked closely to the WTO Doha Round as they must be WTO compatible.

30. Two years further into the negotiations, many of the areas of concern identified in our predecessors' 2005 Report on EPAs remain relevant.[41]These include the prominence given to the New or Singapore Issues in the negotiations, namely investment protection, competition policy, transparency in government procurement, and trade facilitation.[42] ACP representatives have told us that, while they do not question the importance of the Singapore issues, they lack the capacity to implement them.[43] The Commissioner assured us that these issues would be "voluntarily taken on, negotiated and tailored to the development conditions of those countries and progressively implemented over a fairly long period".[44] However, a Commission working document on EPA negotiations with the Southern African Development Community (SADC), one of the regional ACP groupings, suggests that developing countries may be penalised for failing to address the Singapore issues to the satisfaction of the Commission:

"It should also be made clear to SADC that if, in the end, the region would choose not to make an effort in addressing [… the Singapore] issues, then the EC [European Community] will find it difficult to improve SADC access to its market."[45]

31. We remain concerned that the EU is abusing its position in the partnership to persuade the ACP countries that the New or Singapore Issues are essential for development and by implying that there may be penalties if they reject them. We believe both elements of the Commissioner's assurance to us—voluntary inclusion of the issues and a long implementation period—are necessary in order to prioritise development outcomes for the EPAs. We would encourage him urgently to ensure that the Commission as a whole is taking this approach across the board.

32. We were disappointed to be told by ACP representatives that the dialogue between the Commission and ACP groups is poor. Notably, ACP countries say that they do not receive timely feedback on their negotiating proposals or they are told their proposals are not acceptable without a full explanation of why this is so.[46] We were also told that the Trade Commissioner does not meet the Ambassadors himself to discuss progress in the negotiations.

33. A review of the negotiations is currently underway. The Government has told us that it views the review as an "opportunity [for the Commission] to respond to ACP concerns about the negotiations".[47] We recommend that the Government examine EU-ACP communication channels and look for opportunities to facilitate or improve that communication in this critical phase of the negotiations. The Government should ensure that the EPA review which is underway allows the concerns of ACP states to be aired fully and addressed. The Government should also encourage the Trade Commissioner to meet ACP Ambassadors personally to discuss progress in the negotiations.

Extension of existing preferences beyond 2007

34. The December 2007 deadline for concluding the EPA negotiations is fast approaching. At a meeting in Khartoum in December 2006, ACP ministers noted that many groupings were behind schedule in the negotiations and their declaration called for an urgent high-level meeting to "take stock" of progress.[48] Subsequently, when African Union Trade Ministers met in January, they issued a declaration noting that more time may be needed to conclude the EPAs and some Ministers made speeches seeking assurance that existing preferences would remain in place until there was a successful conclusion.[49] Furthermore, we have heard from ACP representatives and members of the European Parliament Committee on Development that progress has been slow and that there is now little chance that the regional groupings will be ready to conclude by the deadline.[50] The review of the EPA negotiations which is underway may highlight the difficulty that some regional groupings, such as the Pacific, will have in concluding the negotiations within the set timeframe.

35. The Commissioner told us that any delays in concluding these Agreements would not come without cost:

"If they [ACP countries] will not reach an agreement I cannot impose it on them, but the costs of not reaching an agreement are very sizeable for the ACP […]. The economic cost is not going to be in Europe. The economic cost is going to be amongst the ACP countries themselves."[51]

He also warned that an extension to the negotiating period, under a WTO waiver, could not be guaranteed. We note that the US submitted a waiver request in March 2005 for African Growth and Opportunities Act (AGOA) countries and has requested waiver extensions for its two other trade preference programmes: the Caribbean Basin Economic Recovery Act and the Andean Trade Preference Act.[52] The WTO has yet to take a decision on these requests. We recognise that some brinkmanship may be involved in negotiations and that the period for negotiating Economic Partnership Agreements (EPAs) has been substantial. We believe, however, that the EU should now undertake thorough contingency planning so as to be in a position to request a WTO waiver, as the US has done, should the EPA negotiations not conclude by the deadline.

36. The EU is obliged under the Cotonou Agreement to table alternatives to EPAs if these are requested. The existing Everything but Arms (EBA) initiative, providing duty free access to EU markets for all exports except arms, is the alternative for least developed countries. However, we did not hear evidence from the Commission to suggest that the EBA was a viable alternative.[53]The Trade Commissioner said that the EPAs would be a more attractive option for developing countries:

"The point of the Economic Partnership Agreements is the recognition that trade liberalisation alone is not an answer or a panacea to development [...]. We need to put in place local and regional customs union and trade opening arrangements amongst those countries so that their markets grow, their opportunities for trade with and amongst ACP countries within those regions will be increased and that new rules and conditions for investment will lead to higher inflows of foreign direct investment."[54]

Concern was expressed by some ACP representatives that the pace of regional integration encouraged by the EU under the EPAs was beyond what they felt able to deal with. In its response to our predecessors' 2005 Report, the Government was supportive of the need to allow developing countries "maximum flexibility" over arrangements and said that the EU "should make an upfront offer of EBA access to all ACP countries in each regional group, with no strings attached".[55]

37. We recognise the argument that the Economic Partnership Agreements offer greater potential to grow regional markets than the Everything but Arms (EBA) arrangements. We believe that regional groupings themselves will best be able to assess their capacity to integrate and the pace at which this should take place. We continue to believe that the EBA should be a real option, in particular for least developed ACP countries who should not have to offer reciprocal market access to the EU until they have graduated from least developed country status. We were pleased to see that the Government broadly agreed with our view but we are disappointed that the EU negotiating position does not reflect this flexibility more explicitly.

Southern African Development Community

38. The Southern African Development Community (SADC) is one of the regional groupings of the ACP involved in EPA negotiations. The grouping brings together widely varying economies ranging from South Africa to Malawi. It is this grouping which therefore brings into starkest relief the challenges of agreeing arrangements which bind a whole region. The Government reply to our predecessors' 2005 Report referred to DFID research on asymmetric liberalisation—special arrangements which allow countries in the negotiation to liberalise at different paces and on different timetables and without strict reciprocity of access to markets—which highlighted:

"[…] the need to use different scenarios on product coverage and transition periods for each ACP country and regional group. This is possible under the current rules in Article XXIV."[56]

39. We support this approach and believe that each ACP group should be free to make decisions on the pace, sequencing and product coverage of market opening. After initial signs that the Commission would not endorse significant asymmetrical liberalisation within the SADC grouping, the latest Commission position recognises that "due to South African competitiveness, especially in agriculture, it is inevitable to grant a different regime for the access to the EU market to South Africa and the other EPA members."[57] The Commissioner also told us that asymmetry within the regional market would also be possible.[58] We endorse the flexible approach to market access and asymmetrical liberalisation present in the Commission's current position on the Southern African Development Community Economic Partnership Agreement (EPA). We look forward to the successful conclusion of the EPA on that basis.

41 International Development Committee, Sixth Report of Session 2004-05, Fair trade? The European Union's trade agreements with African, Caribbean and Pacific countries, HC 68, Conclusions and recommendations. Back

42 They are known as 'Singapore Issues' in reference to four working groups set up during the WTO Singapore Ministerial Conference (1996). Back

43 Private meetings of the Committee in Brussels, January 2007 Back

44 Q 57 Back

45 European Commission Staff Working Document, SEC(2006)1427, paragraph 25 (http://ec.europa.eu) Back

46 Informal meetings of the Committee in Brussels, January 2007 Back

47 International Development Committee, Third Special Report of Session 2006-07, DFID Departmental Report: Government Response to the Committee's First Report of Session 2006-07 HC 328, response to recommendation paragraph 19 Back

48 Fifth ACP Summit, Khartoum, 7-8 December 2007 (5thacpsummit.gov.sd) Back

49 Conference of Ministers of Trade of the African Union, Third Extraordinary Session, 15-16 January 2007, Addis Ababa, Ethiopia (www.uneca.org/eca_resources/news/2007/EPA_Addis_Ababa_Ministerial_Declaration.pdf) Back

50 Private meetings of the Committee in Brussels, January 2007 Back

51 Q 59 Back

52 http://www.wto.org/english/news_e/news06_e/ctg_chairpersons_e.htm; and http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/asset_upload_file236_9455.pdf, p 28 Back